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Uber and Lyft are fighting a critical battle against New York City — and this time, they might not win

At stake: A potential cap on the number of ride-hail cars in the city.

New York City Council Member Brad Lander at a taxi rally outside of City Hall
New York City Council Member Brad Lander at a taxi rally outside of City Hall
Johana Bhuiyan

A familiar scene played out in New York City this week. While Uber and Lyft users’ inboxes were flooded with urgent pleas to speak up against new rules proposed by the City Council (“Arriving now: Higher prices,” the Uber app warned), drivers organized by the New York Taxi Workers Alliance stood outside City Hall demanding more regulation of the ride-hail companies that have undermined the city’s iconic yellow cabs.

The proposed rules give the New York City Taxi and Limousine Commission the authority to regulate minimum wages for drivers and the number of cars allowed to drive for ride-hail companies, among other things. The bill also proposes a 12-month freeze on new ride-hail cars while the Commission conducts a study on how Uber, Lyft and their local competitors affect traffic congestion and livable wages.

Both Uber and Lyft have launched campaigns to fight parts of the bills. While the new-car freeze has taken center stage, it’s what happens after that has become a major cause for concern. Specifically, that the TLC — an agency with which both Uber and Lyft have had a sometimes contentious relationship — will have the wide-ranging authority to do things like impose a permanent cap on the number of ride-hail licenses and set a standard utilization rate for cars. But that depends on what the study finds.

One deadline to make changes to the bills has already come and gone. The companies had until midnight on Tuesday to convince New York City Council members to make amendments to their bills, and few substantive changes have been made. The Council, which seems to be motivated to get these bills passed, will vote next week.

New York City can set a precedent

While New York City has always been one of the most regulated markets for Uber and Lyft in the U.S., it’s Uber’s largest U.S. market by far. So any battle in New York City is a critical one for both companies. And as both Uber and Lyft plan to go public in the next two years, a 12-month pause on growth here could be particularly undesirable.

Even worse, this may set a precedent for other cities to impose a cap on Uber and Lyft vehicles in an attempt to regulate the companies’ growth.

So both companies are hoping advocacy from its most loyal riders — as well as community and civil rights leaders — will convince New York’s City Council members to vote against the bill.

It’s a playbook as old as, well, Uber in New York. The city would try to impose regulations on the ride-hail companies and Uber and Lyft would fight back using the most powerful tools in their arsenal: Their customers.

The city, on occasion, would have the support of Uber and Lyft drivers, but fairly often had the backing of taxi drivers. This time, the city has both.

And as they’ve done before, both sides claim the other is being a tad disingenuous on some points.

Uber driver protest Johana Bhuiyan for Recode

At the City Hall rally on Tuesday, drivers held up signs that said “80,000 cars. 42 percent empty at all times. Cap now.” Meanwhile, Uber users received an email that read, “Tell the City Council: a cap on Uber is not the answer.” For every sign that lamented the six recent taxi-driver suicides and called for regulation of Uber, there were tens of thousands of emails sent out by Uber with the subject line: “URGENT: Your ride is at risk.”

The proliferation of ride-hail companies in the city has taken a toll on the existing taxi industry — as well as some of its own drivers.

As the number of ride-hail vehicles on the road rocketed to more than 80,000, the price of a taxi medallion — issued by the TLC — has plummeted from $1.3 million in 2013 to between $160,000 and $250,000. That has reportedly led to a string of apparent suicides by drivers who could not pay off their debts. It also has led to what council members and drivers have called a “race to the bottom,” with low fares for drivers who were once promised $90,000 a year — earnings Uber no longer pretends drivers can make.

To that end, Lyft, Uber and Via, a local competitor, proposed a $100 million fund — paid for by the companies — to help taxi drivers suffering from medallion debt. In exchange, the companies asked to do away with the bills that give the TLC the ability to cap the number of vehicles allowed as well as set a standard for how well-utilized its cars are. The city declined.

This new set of bills is an attempt by the City Council to bring stability to a fragile market and reduce traffic congestion. Studying the market and ensuring no cars are driving around too long without passengers is a big part of that, Council members contend.

It’s worth noting that the last time the city took on Uber, it lost. And badly. After Mayor Bill de Blasio proposed a six-month cap on Uber to study its effects on congestion, Uber waged a month-long public relations war. De Blasio eventually backed off.

But this time, Uber and Lyft have less time and are up against a package of bills that also include driver-friendly provisions — making it harder to fight.

The companies don’t take issue with all aspects of the five proposed bills. Uber, for its part, says it has no problem with provisions that call for a minimum livable wage for drivers or a utilization standard for each car. It’s the ambiguity in how the TLC would determine utilization that Lyft takes issue with. Still, on its face, it benefits Uber and Lyft to have more people in more cars — especially in the companies’ shared-ride services, which both companies have made a priority.

But the companies have a problem with the 12-month pause on new cars, arguing it would deteriorate the quality of its service, especially in the city’s outer boroughs, where Uber has been a game-changer. The companies argue fewer drivers on the road would mean more unmet demand because drivers will be flocking to city centers.

Both companies claim the majority of their trips currently start or end outside of Manhattan’s central business district.

Is this a civil rights issue?

The companies have made it a civil rights issue, with backing from activists like Rev. Al Sharpton, claiming service in underserved areas will diminish.

The city says that doesn’t have to be the case. For one, there is a provision in the bill that allows for Uber and Lyft to ask for more licenses during the pause if demand is not being met in New York City’s outer boroughs.

“[Uber is] looking for the arguments that will support their cause,” Council member Brad Lander told Recode. “I think the pay regulation is going to mean that Uber and Lyft give incentives to their drivers to drive in the places they need them, which they’re already doing to some extent. ...

“If it’s in Uber and Lyft’s interest to get utilization rates up because of the driver pay regulation,” Lander said, “they will have an interest in incentivizing spreading their drivers out in a thoughtful and strategic way that matches demand.”

Lyft, which has long trailed Uber in New York City, says it’s concerned about driver churn during the pause. About 25 percent of drivers leave the network every year, Lyft says, which suggests the company will be unable to meet demand if it can’t replace them. Indeed, as the current provision is written, there’s no way for a driver who wants to stop driving for ride-hail companies to transfer their vehicle licenses to another driver.

However, the bill allows for all for-hire vehicle companies to add wheelchair-accessible vehicles to their fleets. Companies were required to ensure 25 percent of the cars on the road were wheelchair accessible by 2023, and they’ve yet to reach that figure. The city council contends if Uber and Lyft added more wheelchair-accessible cars to their fleet, there would still be a significant amount of growth. The problem is wheelchair-accessible vehicles are much more expensive.

“We aren’t taking away any service that is currently being offered,” City Council Speaker Corey Johnson said in a statement. “We are pausing the issuing of new licenses in an industry that has been allowed to proliferate without any appropriate check. And if anyone wants to put a new wheelchair-accessible vehicle on the road, they can do that. In fact, we encourage them to do that.”

In the lead-up to next week’s vote, Uber and Lyft are scrambling to activate their customer base with the help of big names and third-party pressure, hoping that the City Council will ultimately vote against the bills.

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